It’s no at all shocking that the majority of music downloaded today are illegal, but numbers released by International Federation of the Phonographic Industry (IFPI) are somewhat worrying.
According to the IFPI report, which represents the music industry worldwide, 95 percent of all music downloaded online is illegal -- that is, obtained without rights from the holders of the property.
“Generating value in an environment where 95 per cent of music downloads are illegal and unpaid for is still the biggest challenge for music companies and their commercial partners,” the IFPI said in a release.
Amidst all the piracy, digital music sales are still up, growing by an estimated 25 percent to $3.7 billion in trade value. The report puts digital platforms at around 20 percent of recorded music sales, up from 15 percent in 2007.
The ability to purchase single tracks rather than a full album is one allure of digital music sales -- a habit that was up 24 percent in 2008. Interestingly enough, full album sales were up 36 percent over the previous year.
"The recorded music industry is reinventing itself and its business models,” said John Kennedy, chairman and chief executive of IFPI. “Music companies have changed their whole approach to doing business, reshaped their operations and responded to the dramatic transformation in the way music is distributed and consumed.”
Some music companies that are up with the times get that selling music alone isn’t the only way to make money. “We don’t sell records any more, we act wherever people experience music, from digital and physical formats to all the other ‘touch points’ of the music experience: from being part of the discovery process, to music in games like Rock Band and Guitar Hero or recording and selling music at live events and so on,” said Elio Leoni Sceti, chief executive of EMI Music. “Our role is not to put physical discs on a shelf but to reach consumers wherever they are.”
Greg Turner, creative licensing manager, film and computer games of Universal Music UK echoed that idea. “Games are an increasingly popular way for new acts to reach new audiences. As the games get more sophisticated, the opportunities for in-game advertising, product placement and personalization of the experience will increase. The possibilities are endless.”
Social networking is another avenue now explored by the record labels. “Twenty to thirty percent of MySpace U.S. monthly traffic in 2007 was made up of music destination unique visitors,” said Michael Nash, executive vice president, digital strategy&business development at Warner Music Group.
“Social networks have been terrific for fans looking for bands they know, but far more challenging as a way of finding new bands. We have to help fans find music wherever they are at the moment they want it. If we can do that we will find ways to monetize it,” added Douglas Merrill, president, digital business at EMI Music.
Aside from trying to add value to paid downloads, the music industry is also pushing policing measures to governments and Internet service providers.
"There is a momentous debate going on about the environment on which our business, and all the people working in it, depends,” said Kennedy. “Governments are beginning to accept that, in the debate over ‘free content’ and engaging ISPs in protecting intellectual property rights, doing nothing is not an option if there is to be a future for commercial digital content.”